Millennials are anxious and confused about the home-buying process, according to a loanDepot study. While being ready to start a family and not wanting to rent are the top homeownership drivers for adults age 20-36, only 18% of those surveyed think they can afford to buy a home.
Lenders can serve a vital advisory role to millennials by dispelling myths about the home buying and mortgage processes and educating them about options to manage upfront and ongoing costs.
Here's a look at the five essential lessons lenders can teach millennials to get them ready for homeownership.
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No. 1: Debunk down payment myths
On average, millennials think they need a 32% down payment to buy a home, according to loanDepot's survey. What's more, about 63% of respondents said they were concerned about saving enough for a down payment to buy a home. The reality is that many low down payment programs allow borrowers to make as little as a 3% down payment.
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No. 2: Covering closing costs
Many millennials are unaware of costs beyond the down payment that are required to close. Lenders should help millennials prepare for all final costs, including homeowners association, title and appraisal fees, taxes and insurance. Also, first-time homebuyer grant programs can often help lessen the burden of those expenses.
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No. 4: Explain loan product options
About 47% of millennial homeowners surveyed wish they knew more about the types of mortgages available before they purchased their home. With the majority of millennials turning to their parents for home buying advice, lenders should aim to complement that role by explaining the variety of loan products available and advising millennials on how each would fit their needs.
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No. 5: Make rates make sense
Confusion about interest rates was the leading challenge for existing millennial homeowners, with 55% saying they wish they'd known more about rates before buying. While up from a year ago, interest rates are still low by historic standards, creating more flexibility for first-time home buyers.
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